TBILISI

Georgia’s National Bank raised its key refinancing rate to 11 percent from 10.5 percent, its highest since 2008, to curb rising inflation.

In February. the central bank’s monetary policy committee kept the rate unchanged at 10.5 percent.

Inflation has exceeded the central bank’s 3 percent target for several months. Annual price growth stood at 13.7 percent in February, down from 13.9 percent in January. On a monthly basis, consumer prices were up 0.9 percent in February from a month earlier after rising 1.1 percent in January.

The central bank said that the decision was made amid high annual inflation as well as Russia’s invasion of Ukraine.

“It is noteworthy that the sanctions imposed on Russia due to hostilities and restrictions on supplies have significantly increased the prices of certain categories of goods on world markets,” the bank said and added that “intensified inflationary risks amid a new shock have slowed the already projected pace of declining inflation globally.”

“The forecast at this stage is that, on other equal terms, inflation will decline from March, although it will remain above the target for the year,” it said in a statement.

The bank downgraded its economic growth projection to 3-4 percent from a previous forecast of 5 percent in 2022.

Georgia’s economy expanded by 18 percent year-on-year in January this year supported by growth in almost all sectors and compared to 11.5 percent growth in January 2021. Growth was recorded in all sectors of the economy except for construction and communications. For this year, Georgia projects 6 percent economic growth. Last year, Georgia demonstrated double-digit economic growth as the country eased the majority of the restrictions it had imposed to curb the coronavirus pandemic, businesses reopened and tourists tentatively started to return.

The IMF said in July that Georgia’s GDP was projected to grow 5.8 percent in 2022. In October, the IMF said that significant risks, including slow vaccination, remained to Georgia’s economic recovery.

According to the World Bank’s updated forecast, Georgia’s economy is expected to expand by 5,5 percent in 2022 as the “economy is projected to ease toward its potential growth rate in 2022 and 2023 amid tighter fiscal policy.”

In February, Fitch Ratings has affirmed the outlook on Georgia’s long-term foreign-currency Issuer Default Rating (IDR) at ‘BB’ with a Stable outlook.

For 2022 and 2023, Fitch forecast Georgia’s economy to expand by 5.5 percent and 5.3 percent, respectively, above the potential of 4.0-4.5 percent. Increased financial inflows will support private consumption and investment. Recovery in the tourism sector is also projected to pick up, with Fitch forecasting tourism receipts towards 80 percent of 2019 levels in 2022, after reaching 38.1 percent of 2019 levels in 2021.

The next meeting of the central bank’s monetary policy committee will be held on May 11.